Understanding The Merge
Oct 11, 2022 . 4 min read . 118 views
So Ethereum transitioned from Proof of Work to Proof of Stake as its consensus mechanism last month.
Consensus Mechanism
- The methodology used by blockchains to get updated while remaining secure against fraud and attacks.
- e.g: Proof of Work, proof of Stake, etc.
Proof of Work
- Miners incur upfront costs by investing in hardware and electricity
- Earn rewards when they use their machines to mine blocks
Proof of Stake
- Contrary to POW Miners, POS Validators incur negligible upfront costs
- Instead they have to stake their own Ethereum as a collateral
- Validators earn staking rewards for validating blocks
- The ETH gets confiscated in case of malicious behaviour
What happens in the Merge
- Ethereum will transition from Proof of Work to Proof of Stake without pausing the network
- Imagine replacing a car’s combustion engine with an electric engine while the car is being driven without the driver’s realising
- The Merge(What is actually being merged?):
- Eth1: Execution Layer
- The execution layer handles transactions, state management, and the EVM.
- Eth2: Consensus Layer
- The consensus layer handles decisions around forks and the current head of the chain.
- It helps the network reach agreement on which blocks have been added to the chain.
- Execution Layer + Consensus Layer = Ethereum
- In Summary, two things will happen in the merge:
- The Swap: In the consensus layer, POW will be replaced by POS
- The actual Merge: The current execution layer will be merged with the new consensus layer
How Ethereum will look after the merge (For Dummies)
How Ethereum will look after the merge (For gigabrains)
What will not happen after the merge
- Ethereum won’t get faster.
- New blocks will be added every 12 seconds instead of 13 seconds.
- Ethereum won’t get cheaper either.
What will happen
- ETH Issuance will drop by 90%
- As a result, rewards will decrease significantly
- ETH’s triple halvening
- In comparison to Bitcoin’s halvening (rewards are reduced by 50% every 4 years) ETH just experienced Triple halvening at once.
- Ability to earn staking rewards instead of miner rewards
- Enhanced security and decentralization
- 99.5% less energy consumption
What’s Next after the Merge
The Surge
- A surge in Ethereum’s computing capacity
- Adds Sharding
- Splits the entire blockchain into smaller partitions
- 2 ways of processing Big Data
- Scaling Up
- Add more computing to process the same data
- Scaling Out e.g Sharding
- Split the data into fragments and process it on multiple machines
- Scaling Up
- Will make ETH more scalable and faster
The Verge
- ETH validators must maintain access to the full Ethereum state i.e the historical record of all the transactions that have happened on the chain
- With time this can be a lot of data, making it impossible for someone just with a normal laptop to be a validator
- With Verge ETH will move toward stateless network validation
- So that processing power can increase
- And the size of historical record can swell without impacting the validators
- To solve this, in the Verge ETH will Implement Verkle trees(instead of Merkle trees) and Stateless Clients
- Allows for much smaller proof sizes
- Compresses the amount of data required to prove the validity of the block based on historical data
- This will optimise storage on Ethereum and help reduce node size.
- Allows for much smaller proof sizes
- The Verge will make it easier to be/become a validator
- It will also make ETH more scalable
The Purge
- Reduces the hard drive space needed for validators.
- Reduce historical data needed to be maintained by validators from full history to 1 year.
- Streamlines storage, which in turn reduces network congestion.
- Gets rid of technical debt, Simplifies Ethereum.
- Removes old/unnecessary network history
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- The Purge will make it further easier to be/become a validator
The Splurge
- Series of small updates to ensure the network runs smoothly